March 10. 2010
The February non-farm payrolls report from the Bureau of Labor Statistics boosted the optimism of many commentators who follow the unemployment crisis. Nevertheless, predictions about the employment outlook for the remainder of 2010 are extremely conflicting. Surfing around the web will give you completely divergent prognostications, usually depending on the locale. Here are some examples: Los Angeles job outlook expected to improve (Los Angeles Times); Atlanta employers expect to hold payrolls steady — neither hiring nor firing (Atlanta Journal-Constitution) Boston employers expected to add jobs (The Boston Globe — quoting a Manpower report); Employers still skittish on hiring (CNNMoney.com); Columbus hiring prospects for upcoming quarter weaken slightly (ledger-inquirer.com).
In an essay for the istockanalyst.com website, Ockham Research began by pointing out that 8.4 million jobs have been lost since the recession began in December of 2007. The fact that the S&P 500 has advanced 70% during this time has encouraged pundits to believe in a jobless recovery. After noting Senator Harry Reid’s odd reaction to the February non-farm payrolls report: “Only 36,000 people lost their jobs today, which is really good” — the piece continued:
After that blunder, the report on Bloomberg.com struck us in just how optimistic it is towards March’s employment data, thanks in part to temporary hiring for census workers which could add more than 100,000 jobs this month. However, a strategist for Goldman Sachs (GS) estimated 275,000 job gains; another economist predicted “easily” reaching 300,000. Chief US economist at Deutsche Bank (DB) took the prize though, saying that a gain of 450,000 “can’t be ruled out.”
The Ockham Research piece again emphasized that many of the optimistic views are based on the addition of census workers to the rolls of the employed, despite the fact that these are temporary positions, eventually disappearing in mid-summer. Ockham Research was also dismissive of the inclusion of workers added to payrolls simply because of summertime seasonal employment opportunities. They concluded on this note:
Of course, no one can predict the future and predictions about macroeconomic data points are extremely thorny. As much as we would like to believe they are correct and job growth will return in robust fashion, we are a bit skeptical. They have raised the bar for expectations, so it will be extremely interesting to see the market’s reaction when the data comes in.
The Seeking Alpha website featured a posting by David Goldman which began with these remarks:
. . . it would be hard to envision significant declines in payroll employment from already miserable levels. But the sort of things that generate jobs — venture capital investments, small business expansion, and so forth — are as dead as the Monty Python parrot.
Mr. Goldman focused on the February Small Business Confidence report by Discover Card, which revealed that America’s small business owners remained cautious about the economy during February as they expected economic conditions to stay largely the same during the coming months. At the close of the piece, we are reminded of its title, “Where Will the Jobs Come From?” —
With the continuing catastrophe in both the residential and commercial real estate markets, small business capital has imploded. And small business surely isn’t getting help from the banking system, where loans still are contracting at the fastest pace on record.
Two economists for the Federal Reserve Bank of San Francisco, Mary Daly and Bart Hobijn, recently published a research paper addressing the surprisingly high unemployment rate for 2009, based on a principle known as Okun’s Law. They explained it this way:
Okun’s law tells us that, for every 2% that real GDP falls below its trend, we will see a 1% increase in the unemployment rate. Since real GDP was almost flat in 2009 while its trend level increased by 3%, the unemployment rate under Okun’s law should have increased by 1.5 percentage points. Instead it rose by 3 percentage points, more than twice the predicted increase.
I will now fast-forward to their conclusion:
The data presented here consistently point to unusually strong productivity growth as the main driver of the departure from Okun’s law in 2009. A key question that remains unanswered by this analysis is whether this pattern will continue in 2010. Most forecasters assume that the economy will return to its historical path this year, following Okun’s two-to-one ratio of changes in GDP and changes in unemployment. Under this scenario, unemployment would begin to edge down this year as the economy recovers and gains momentum. But there are clearly risks to this view. . . .
Anecdotal evidence suggests that efforts to contain costs and remain nimble in the face of uncertainty have become a fixture in business strategy. If productivity keeps on growing at an above-average pace, then unemployment forecasts based on Okun’s law could continue to be overly optimistic.
So there you have it. Pick your favorite prediction and run with it. The Manpower Employment Outlook Survey seems to have a reasonable take on expectations for the second quarter of 2010:
“U.S. hiring activity is still in neutral, but revving toward first gear,” said Jonas Prising, Manpower president of the Americas. “It’s moving in the right direction, but it will take some time, with no major speed bumps, before it can accelerate.”
Let’s just hope the road ahead doesn’t have any sinkholes.
Occupy Movement Gets Some Respect
Much has changed since the inception of the Occupy Wall Street movement. When the occupation of Zuccotti Park began on September 17, the initial response from mainstream news outlets was to simply ignore it – with no mention of the event whatsoever. When that didn’t work, the next tactic involved using the “giggle factor” to characterize the protesters as “hippies” or twenty-something “hippie wanna-bes”, attempting to mimic the protests in which their parents participated during the late-1960s. When that mischaracterization failed to get any traction, the presstitutes’ condemnation of the occupation events – which had expanded from nationwide to worldwide – became more desperate: The participants were called everything from “socialists” to “anti-Semites”. Obviously, some of this prattle continues to emanate from unimaginative bloviators. Nevertheless, it didn’t take long for respectable news sources to give serious consideration to the OWS effort.
One month after the occupation of Zuccotti Park began, The Economist explained why the movement had so much appeal to a broad spectrum of the population:
Reports eventually began to surface, revealing that many “Wall Street insiders” actually supported the occupiers. Writing for the DealBook blog at The New York Times, Jesse Eisinger provided us with the laments of a few Wall Street insiders, whose attitudes have been aligned with those of the OWS movement.
By late December, it became obvious that the counter-insurgency effort had expanded. At The eXiled blog, Yasha Levine discussed the targeting of journalists by police, hell-bent on squelching coverage of the Occupy movement. In January, New York Mayor Michael Bloomberg lashed out against the OWS protesters by parroting what has become The Big Lie of our time. In response to a question about Occupy Wall Street, Mayor Bloomberg said this:
The counterpunch to Mayor Bloomberg’s remark was swift and effective. Barry Ritholtz wrote a piece for The Washington Post entitled “What caused the financial crisis? The Big Lie goes viral”. After The Washington Post published the Ritholtz piece, a good deal of supportive commentary emerged – as observed by Ritholtz himself:
Once the new year began, the Occupy Oakland situation quickly deteriorated. Chris Hedges of Truthdig took a hard look at the faction responsible for the “feral” behavior, raising the question of whether provocateurs could have been inciting the ugly antics:
Chris Hedges gave further consideration to the involvement of provocateurs in the Black Bloc faction on February 13:
Despite the negative publicity generated by the puerile pranks of the Black Bloc, the Occupy movement turned a corner on February 13, when Occupy the SEC released its 325-page comment letter concerning the Securities and Exchange Commission’s draft “Volcker Rule”. (The Volcker Rule contains the provisions in the Dodd-Frank financial reform act which restrict the ability of banks to make risky bets with their own money). Occupy the SEC took advantage of the “open comment period” which is notoriously exploited by lobbyists and industry groups whenever an administrative agency introduces a new rule. The K Street payola artists usually see this as their last chance to “un-write” regulations.
The most enthusiastic response to Occupy the SEC’s comment letter came from Felix Salmon of Reuters:
John Knefel of Salon emphasized how this comment letter exploded the myth that the Occupy movement is simply a group of cynical hippies:
Even Mayor Bloomberg’s BusinessWeek spoke highly of Occupy the SEC’s efforts. Karen Weise interviewed Occupy’s Alexis Goldstein, who had previously worked at such Wall Street institutions as Deutsche Bank, where she built IT systems for traders:
Chris Sturr of Dollars & Sense provided this reaction:
If Chris Sturr’s expectation ultimately proves correct, it will be nice to watch the pro-Wall Street, teevee pundits get challenged by some worthy opponents.